Madison River Capital, LLC Announces 2005 First Quarter Unaudited Financial and Operating Results

Business Wire, May 5, 2005

MEBANE, N.C. -- Madison River Capital, LLC today announced its unaudited financial and operating results for the first quarter ended March 31, 2005.

2005 First Quarter Financial and Operating Results

The Company reported an increase in net operating income of $2.4 million, or 19.3%, to $15.3 million in the first quarter ended March 31, 2005 from $12.9 million in the first quarter ended March 31, 2004. Revenues in the first quarter of 2005 were $47.9 million, a decrease of $0.7 million, or 1.3%, compared to revenues of $48.6 million in the first quarter of 2004. In addition, the Company reported net income of $0.6 million in the first quarter of 2005, an improvement of $1.9 million compared to a net loss of $1.3 million in the first quarter of 2004.

Adjusted Operating Income (1), previously referred to by the Company as Adjusted EBITDA, is net operating income (loss) before depreciation, amortization and non-cash long-term incentive plan expenses. Please refer to Footnote 1 - "Non-GAAP Financial Measures" for a reconciliation of Adjusted Operating Income to net operating income (loss). For the first quarter ended March 31, 2005, the Company reported Adjusted Operating Income of $25.0 million, computed by taking net operating income of $15.3 million and adding back depreciation and amortization expense of $9.3 million and long-term incentive plan expenses of $0.4 million. Adjusted Operating Income in the first quarter of 2005 decreased $0.9 million, or 3.4%, from Adjusted Operating Income of $25.9 million reported in the first quarter of 2004.

For the first quarter of 2005, the RLEC operations reported revenues of $45.2 million, a decrease of $0.3 million, or 0.5%, compared to revenues of $45.5 million in the first quarter of 2004. The decrease is attributed primarily to a $1.3 million decrease in local service revenues partially offset by a $0.9 million increase in Internet and enhanced data services revenues and a $0.1 million increase in miscellaneous telecommunications revenues. Long distance revenues were approximately $3.8 million in the first quarter of 2005 and the first quarter of 2004. The decrease in local service revenues is attributed primarily to lower end user revenues as the result of a decrease in voice access lines in service. The RLEC operations served 179,388 voice access lines at March 31, 2005 compared to 185,453 voice access lines in service at March 31, 2004, a decrease of 6,065 lines or 3.3%. In addition, local service revenues decreased as a result of a decrease in network access revenues. The increase in Internet and enhanced data services revenues is attributed to the growth in the number of DSL connections in service. At March 31, 2005, the RLECs served 41,857 DSL connections compared to 30,646 DSL connections at March 31, 2004, an increase of 11,211 connections, or 36.6%. The increase in miscellaneous telecommunications revenues is attributed primarily to a decrease in uncollectible expenses, which are included in miscellaneous telecommunications revenues, in the first quarter of 2005 compared to the first quarter of 2004.

Net operating income reported in the RLEC operations for the first quarter ended March 31, 2005 was $17.8 million compared to net operating income for the first quarter ended March 31, 2004 of $15.8 million, an increase of $2.0 million, or 13.2%. The increase in net operating income is attributed primarily to a decrease in operating expenses of $2.3 million, partially offset by the decrease in revenues as discussed above. Within operating expenses, depreciation and amortization expenses decreased $2.1 million in the first quarter of 2005 when compared to the first quarter of 2004 largely due to certain classes of assets becoming fully depreciated. Cost of services and sales increased approximately $0.3 million in the first quarter of 2005. The increase is attributed primarily to additional expenses related to storm damage restoration in Alabama and higher contract labor expenses for a special project by Coastal Utilities in Georgia in the first quarter of 2005 when compared to the same period in 2004. These increases were partially offset by a reduction in expenses for DSL modems as the number of new DSL connections was lower in the first quarter of 2005 compared to the first quarter of 2004. A decrease of $0.5 million in selling, general and administrative expenses in the first quarter of 2005 compared to the first quarter of 2004 is attributed primarily to a $0.5 million decrease in long-term incentive plan expenses.

Net income in the RLEC operations was $8.5 million in the first quarter of 2005, an increase of $0.2 million, or 2.9%, from net income of $8.3 million in the first quarter of 2004.

For the quarter ended March 31, 2005, the RLEC operations reported Adjusted Operating Income (1) of $24.9 million and an Adjusted Operating Income margin of 55.1%. The Adjusted Operating Income margin (1), previously referred to by the Company as "Adjusted EBITDA margin", is computed by dividing the RLEC's Adjusted Operating Income of $24.9 million by the RLEC's revenues of $45.2 million. For the same quarter of 2004, the RLEC operations reported Adjusted Operating Income of $25.4 million and an Adjusted Operating Income margin of 56.0%. Please refer to Footnote 1 - "Non-GAAP Financial Measures" for a reconciliation of Adjusted Operating Income and Adjusted Operating Income margin to net operating income (loss) and net operating income margin, respectively.